**#1 It’s interest rate day. The central bank’s Monetary Policy Committee will have to juggle fallout from the Emerging Markets Zombie Apocalypse, the imperative to lower interest rates to turbocharge corporate growth (and real job creation), higher yields on government bonds, a potentially weaker EGP, and inflation. Economists surveyed by both Reuters and Bloomberg unanimously believe that the CBE will keep interest rates on hold in light of a challenging macroeconomic climate.

The EM Zombie Apocalypse: The CBE cited the selloff in EM as one of the reasons it left rates unchanged at its last meeting. In the time since, borrowing costs have gone up significantly for EMs as investors demand higher yields for debt. Compounding the matter for Egypt are reports of declining appetite for the EGP despite it having remained fairly stable (it has lost just 1.7% of its value against the USD in the past six months, while a broader index of EM currencies has slid c. 7.8%). Carry trade outflows have came in at USD 6 bn between April and June, putting pressure on the EGP. The upside is that the EGP is still considered moderately stable compared to other EMs, according to EFG Hermes’ Mohamed Abu Basha. “The EGP made minimal gains on the way up and will make minimal losses now that the flow has reversed,” he tells Bloomberg. “We see the spillover into Egypt largely resulting in higher domestic interest rates for longer.”

The treasury is paying a lot to borrow: The government had forecast in this year’s budget that yields on treasuries would be something along the lines of 14.7%, down from 18.5% in the previous fiscal year. Instead, yields have been averaging around 19% since the FY started in June, raising the costs of debt service in the budget and forcing the government to cancel four bond auctions. Every 1 percentage point increase in average rates raises the debt servicing bill by EGP 4-5 bn, according to the state budget. The government has since made debt control the guiding fiscal strategy and is looking to the international debt markets for financing — great, because interest rates are lower. Bad, because you’re now taking on new FX risk.

The struggles of the private sector: The private sector has been in a high interest rate climate. Companies are “reluctant to borrow for expansion because loans are expensive,” said Monsef Morsy, head of financial analysis at CI Capital in Cairo. “Credit is indeed growing, but it’s mostly to fund working capital, and not for investment.” And who can blame prospective borrowers? What kind of return on investment do you need to justify to pay credit-card interest rates when you put in a new production line?

Impact of EM apocalypse on Egypt will be reviewed next month: Egypt can withstand the impact of the emerging market selloff, said Planning Minister Hala El Said on Wednesday, according to Al Mal. The true impact of the crisis on Egypt’s fiscal and growth targets for 1Q2018-19 will be reviewed in October, she added.